Britain Loses Half of Its Millionaires

Tuesday there was The Wall Street Journal talking about the vanishing Maryland millionaires. Now comes word that Britain has lost about half its millionaires.

Associated Press

The reason isn’t emigration or tax revolts. It is personal finances.

As I have been writing for the past year, the rich have been hammered by this crisis, largely because of the plunge in the value of their investments and real estate. As a result, the millionaire population (especially the lower end) is taking a dive.

The number, from the Centre for Economics and Business Research, is surprising for several reasons. Britain’s Rich Listers lost about 38% of their wealth. And I would have expected America’s millionaires to have done just as poorly as Britain’s have — if not worse, given that the U.S. is the epicenter of the financial crisis.

Charles Davis, an economist at CEBR, gave me two reasons for why the U.K. is losing more millionaires than the U.S. First is the issue of timeframe. The CEBR data are for total millionaires lost from 2007 through May 2009. The U.S. data, showing the 30% loss, cover just 2008. So, 2009 is likely to show more losses in the U.S.

The second reason is that more British millionaires owed their newfound fortunes to real estate. British millionaires had about 42% of their assets in real estate in 2007, according to CEBR. That compares with about 25% for American millionaires, according to the Federal Reserve.

Property prices have fallen about 20% from the peak in the U.K., thus stripping many newfound millionaires of their millionaire status.

“In the U.K., quite a lot of people drifted into that millionaire band inadvertently based on property prices,” Mr. Davis says.

Now, they have inadvertently drifted out.

Do you think the ranks of U.S. millionaires will also fall 50% by year end?

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